DIRECTOR GENERAL OF INCOME TAX (INVESTIGATION) PUNE & ORS. versus M/S. SPACEWOOD FURNISHERS PVT. LTD. & ORS.

Citation: [2015] 6 S.C.R. 807 · Decided: 13-05-2015 · Supreme Court of India · Bench: RANJAN GOGOI · Disposal: Appeal(s) allowed

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Judgment (excerpt)

I • 
(2015] 6 S.C.R. 807 
DIRECTOR GENERAL OF INCOME TAX 
A 
(INVESTIGATION) PUNE & ORS. 
v. 
MIS. SPACEWOOD FURNISHERS PVT. LTD. & ORS. 
(Civil Appeal No.4394 of 2015) 
May 13, 2015. 
[RANJAN GOGOi AND PINAKI CHANDRA GHOSE, JJ.] 
Income Tax Act, 1961-s.132-Warrantofauthorization 
B 
c 
for search of the premises of assessee - Interference with by 
High Court - In exercise of jurisdiction u/Art. 226 of the 
Constitution - Propriety of - Held: The assessee is not 
entitled to communication of the reasons for the belief at the D 
stage of issuing of the authorization - High Court committed 
serious error in reproducing in great details the content of 
satisfaction notes containing the reasons - Such exercise of 
High Court was highly premature conferring undue advantage 
to assessee and thereby frustrating the endeavour of the E 
Revenue - The view expressed by High Court with regard to 
satisfaction notes are also flawed- There was also no basis 
for the High Court to hold that there was possibility of 
manipulation of records - The findings of High Court with F 
regard to sufficiency and adequacy of reasons and the 
authenticity and acceptability of the information on which ' 
satisfaction had been reached, was in the nature of appellate 
· exercise, hence not permissible - Constitution of India, 1950 
-Art. 226. 
G 
Allowing the appeal, the Court 
HELD: 1.1 The necessity of recording of reasons, 
807 
H 
808 
SUPREME COURT REPORTS 
[2015) 6 S.C.R. 
A despite the amendment of Rule 112 (2) with effect from 
1•1 October, 1975, has been repeatedly stressed upon so 
as to ensure accountability and responsibility in the 
decision making process. The necessity of recording of 
reasons also acts as a cushion in the event of a legal 
B challenge being made to the satisfaction reached. 
Reasons enable a proper judicial assessment of the 
decision taken by the Revenue. However, the above, by 
itself, would not confer in the assessee a right of 
inspection of the documents or to a communication of 
C the reasons for the belief at the stage of issuing of the 
authorization. Any such view would be counter 
productive of the entire exercise contemplated by 
Section 132 of the Act. It is only at the stage of 
0 commencement of the assessment proceedings after 
completion of the search and seizure, if any, that the 
requisit!'I material may have to be disclosed to the 
assessee. [para 22] [822-C-F] 
1.2 The High Court had committed a serious error in 
E reproducing in great details the contents of the 
satisfaction note(s) containing the reasons for the 
satisfaction arrived at by the authorities under the Act. 
Therefore, the exercise undertaken by the High Court is 
F highly premature; having the potential of conferring an 
undue advantage to the assessee, thereby frustrating 
the endeavor of the revenue, even if the High Court is 
eventually not to intervene in favour of the assessee. 
[para 23] [822-G-H; 823-A-B] 
G 
3. The view expressed by the High Court with regard 
to the satisfaction note(s); the alleged absence of a final 
decision to issue the authorization at the level of the 
Additional Director and the Director; the absence of any 
H satisfaction of the Director General who, according to 
D.G OF I. TAX (INVESTIGATION) PUNE v. SPACEWOOD 809 
FURNISHERS PVT. LTD. 
the High Court took the decision to issue the A 
authorization are all seriously flawed. The different steps 
in the decision making process which is lucidly laid 
down in the instructions contained in the search and 
seizure manual published by the department, have been 
scrupulously followed. [para 24] [823-C-E] 
B 
4. The fact that the Additional Director was not one 
of the competent authorities u/s 132 on 8.6.2009 (date of 
his note) inasmuch as it is by the Finance Act, 2009 
effective from 19'h August, 2009 that the Additional C 
Director came to be included amongst the authorized 
officials though with retrospective effectfrom 1.10.1998. 
The reading of the relevant part of the satisfaction note 
of the Director goes to show that on the basis of materials 
produced satisfaction was duly recorded by him that D 
authorization for search should be issued. The file was 
put up before the Director General (Investigation) for 
accord of administrative approval as required by 
Notification dated 7.3.2001. In fact, the requirement to 
obtain administrative approval is prompted by the need E 
to provide an additional safeguard to the tax payer. A 
careful readin

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